Use the holidays to plot your course on college debt

The period between Christmas and New Year’s Day is an ideal time for college planning. You can often see things in a clear light without the usual family pressures.

Well, OK, the holidays can be really stressful for families. But there are some ways to make the anxiety of the college process go more smoothly in terms of reducing -- or eliminating -- future college loans.

Exactly two years ago, my family was going through the ultimate stress test for college planning: Which colleges should we apply to? Which ones will offer the best financial aid package? How do we avoid debt?

We pretty much knew that most of the big state colleges would saddle us with debt. With state subsidies eroding in recent years for public universities, that’s a given almost anywhere.

That means if you don’t have the savings from a 529 plan or other sources, you’ll have to finance about $100,000 for a four-year degree from a public school. That’s based on paying roughly $20,000 a year in total fees, according to the most recent College Board survey. Since most students aren’t graduating in four years, you’re possibly looking at loans totaling six figures.

Private colleges, according to the College Board, will nick you for $180,000 over four years. That’s another scary number, but here’s one takeaway that will give you some comfort: These are “sticker” prices that you probably won’t pay.

The following are some solid tips that many families ignore when making the college decision.

Look at private schools with higher price tags. This goes against the conventional wisdom, given the huge disparity between private and public school fees. But what counts is the net price -- what you actually pay after all scholarships, grants, work-study programs and tuition discounts are applied.

Don’t get discouraged by the sticker price. Instead, look at how much financial aid a college is likely to dole out. Private colleges often have large endowments and may have lower net prices. We received our most generous aid offers from private schools, even though going into the process we thought public colleges would be a better deal.

How do you find out which colleges are most generous with aid? Check out College Scorecard, the free government site. You can search by college and see how many graduates are receiving aid and taking out loans.

Do the FAFSA! Even if you don’t think you’ll qualify for financial aid, this free government form opens the door to the aid process. If you haven’t filled it out, do it now while you’re not busy. You can even download your tax returns from the IRS.

Do aid estimates. Every college website will give you a ballpark estimate on how much your family is likely to qualify for in terms of an aid package. While these tools aren’t precise, you should go through the motions. It will help you streamline your college selection decision.

A good tool to help you on the aid question is College Abacus. It will give you a better idea of likely net prices from the colleges of your choice.

Diversify your choices. Don’t just create a short list of state schools or solely focus on private colleges. Include in the mix community and commuter schools (always the best values), elite and out-of-state public colleges.

Because colleges are competing for top students, you never know where the best deal is going to come from. Neighboring state colleges in my area, for example, were offering in-state tuition for students from our local high school. One young man received a “free ride” from a top private college because he had four siblings. Apply to a mix of schools.

Know your best financing options. Did you know that the federal college loan program has nine different repayment plans? If your income drops, you can switch to an “income-based” plan. You can also consolidate loans to save money. If you have to borrow, go with federal loans first, which offer the most flexibility.

No matter which financing approach you take, know your total out of pocket costs over time. That means, if financing with loans, calculate your monthly payment and the total interest you’re going to pay.

The best part of this family-oriented discussion is that you have plenty of options. There’s no harm in saving a boatload of money by going to a community or commuter college the first two years. That knocks some $20,000 off your total bill.

Putting in the time to research the best net price is well worth it. And cast a wide net. My daughter applied for and received some $5,000 in local scholarships. That was in addition to a generous scholarship she received at a great private college.

Sure, we spent more time doing research than visiting college campuses, an experience that’s often more like tourist events -- everything looks perfect.

But the investment in time you make now will lighten the financial burden on your family. It’s much less stressful to avoid debt now rather than take it on later.